The move had been rumored last week, but the "Lord of the Rings" auteur confirmed the decision by saying that there was more story to tell than could be contained in the originally planned two films. He said the three movies will draw on related material in the appendices of "The Lord of the Rings," in addition to using J.R.R. Tolkien's original story, as a way to better explain the history of Middle Earth.

"We know how much of the story of Bilbo Baggins, the Wizard Gandalf, the Dwarves of Erebor, the rise of the Necromancer, and the Battle of Dol Guldur will remain untold if we do not take this chance," Jackson wrote.

"So, without further ado and on behalf of New Line Cinema, Warner Bros. Pictures, Metro-Goldwyn-Mayer, Wingnut Films, and the entire cast and crew of 'The Hobbit' films, I’d like to announce that two films will become three," he added.

That means that what Tolkien was able to complete in one book, will now take three films. There's an awful lot of plot in the classic book — a treasure hunt story involving goblins, Wargs and a very menacing dragon — but there's also an economic incentive to extend the scope of Jackson's return to Middle Earth.

For Warner Bros., which is backing the fantasy film through New Line in partnership with MGM, creating an extra "Hobbit" sequel will bolster a film slate that recently saw two of the studio's biggest franchises, Christopher Nolan's Batman films and the Harry Potter series, wrap up after nearly a decade of blockbuster grosses.

The first film in what is now a trilogy, "The Hobbit: An Unexpected Journey" will hit theaters on Dec. 13, 2012, with the second picture, "There and Back Again," premiering on Dec. 13, 2013. Jackson did not say when the third film will be released.

The films, which are prequels to "The Lord of the Rings," star Martin Freeman as Bilbo Baggins and bring back Ian McKellen as the wizard Gandalf.

"It has been an unexpected journey indeed, and in the words of Professor Tolkien himself, 'a tale that grew in the telling,'" Jackson wrote.